Wynn Macau: Time to Play Catch Up

By Ben Levisohn

Wynn Resorts (WYNN) has had a good year so far, Wynn Macau (1128.HK) not so much. That should begin to change, JPMorgan analysts Kenneth Fong and Daisy Lu wrote in a note yesterday.

This chart shows the return from Wynn Resorts versus Wynn Macau.

Through April 22, Wynn resorts has gained 14.1%, to Wynn Macau’s 3.3% There’s little reason for Wynn Macau to lag so much–at least not fundamental ones–Fong and Lu say. The reason: Wynn Resorts gets about 75% of its EBITDA from Wynn Macau, and historically they’ve tracked each other pretty closely. They write:

We believe the recent divergence could leave room for a valuation catch up for Wynn Macau (Figures 1 & 2). Investment implication: Buy Wynn Macau for 1) undemanding valuation, 2) gradually improving 1Q operating trend and 3) on the downside a solid 6% dividend yield as support. We think the upcoming result and dividend (ex-date on May 22) will be a catalyst.

The casino companies with Macau exposure are scheduled to release earnings during the new few weeks. Wynn Resorts is scheduled to report on May 6, according to Yahoo!, Las Vegas Sands (LVS) is scheduled to release on April 25, and MGM Resorts International (MGM) for May 3.

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Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. The Barrons.com Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools.